A two-warehouse inventory model under trade credit in the supply chain management

Abstract

The traditional EOQ (Economic Ordering Quantity) inventory model has three basic assumptions (A), (B) and (C) to be summarized as follows: (A) The retailer must be paid for the items as soon as the items are received; (B) The replenishment rate is infinite; (C) The inventories are stored by a single warehouse with unlimited capacity. Few inventory models with generalizing assumptions (A), (B) and (C) together have been found in the literature. This paper tries to incorporate the above concepts to consider the inventory model with the trade credit, finite replenishment rate and limited storage capacity to relax assumptions (A), (B) and (C) simultaneously to establish a new economic production quantity model. The mathematical model and the solution procedure are developed and numerical examples are provided to illustrate them. Key words: Economic ordering quantity, permissible delay in payments, trade credit, limited storage capacity, finite replenishment rate.